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Disinflation And Housing Investment: A Revisioiiist Analysis

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  • JOHN A. TUCCILLO

Abstract

The pattern of housing investment through the Seventies was a product of high and variable rates of inflation, a financing system that was segmented from other capital markets and restricted in scope, and a tax system that abetted the demand for housing relative to other investments. In the early Eighties, each of these elements changed. Financial reform brought the housing name system into tune with the rest of the financial sector, and tax cuts increased the demand for forms of investment other than housing. Most important, the rate of inflation slowed dramatically, falling below 4 percent in both 1982 and 1983. The result of all these occurrences was fairly predictable: A decline in the demand for housing as an investment. However, this declining demand has been offset by two factors. The first is the drop in nominal interest rates that accompanied declining inflation. This increased the “affordability” of homing. Second, large numbers of households entered prime home‐buying years and spurred demand for housing as shelter. The current situation is a housing market driven more by consumption demand than by investment demand

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  • John A. Tuccillo, 1984. "Disinflation And Housing Investment: A Revisioiiist Analysis," Contemporary Economic Policy, Western Economic Association International, vol. 2(6), pages 17-29, May.
    • Handle: RePEc:bla:coecpo:v:2:y:1984:i:6:p:17-29
    DOI: 10.1111/j.1465-7287.1984.tb00781.x
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    1. Dougherty, Ann & Van Order, Robert, 1982. "Inflation, Housing Costs, and the Consumer Price Index," American Economic Review, American Economic Association, vol. 72(1), pages 154-164, March.
    2. Patric H. Hendershott, 1980. "Real User Costs and the Demand for Single-Family Housing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(2), pages 401-452.
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